The new flexibility, that certain pension pot holders can avail themselves from 6 April 2015, offers more opportunity regarding the funds they have saved. Once you reach minimum pension age, normally 55, you will be able to:

 

• Leave your pension fund invested, no change.
• Enter drawdown, thereby taking some of your money whilst leaving the rest where it is.
• Withdraw cash in one or a number of lump sums.
• Purchase an annuity.
• Go with a combination of all of the above.
• Or take your entire pension pot in one go.

Additionally, from April 2016, people who already have an annuity will be able to effectively sell it on, so that they too can benefit from the pension freedoms announced at last year’s Budget.

Currently, people who have bought an annuity are unable to sell it without having to pay at least 55% tax on the proceeds of the sale. From April 2016, the tax rules will change so that people who already have income from an annuity can sell that when they choose and will pay their usual rate of tax they pay on income, instead of 55%.
With so many options to choose from, and a variety of tax traps to avoid, there has never been a more compelling time to seek professional advice BEFORE you make any decisions.

There were a number of changes to promote savings in the Budget. The main changes are set out below:

Help to Buy ISA

From autumn 2015, a new ISA is being launched that will enable first time buyers to save for their deposit. An initial deposit of £1,000 is allowed with additional monthly savings of up to £200.

The Government will top up these savings by 25% up to a maximum of £3,000 (when deposits by the saver reach £12,000).

The bonus can only be put towards a first time buy of up to £450,000 in London or £250,000 elsewhere.

ISA flexibility

From autumn 2015, ISA savers will be able to withdraw and replace money from their ISAs without using up their ISA subscription limit.

Personal savings allowance

From April 2016, basic rate taxpayers will not have to pay tax on the first £1,000 of interest received on savings, and higher rate (40%) taxpayers will not have to pay tax on the first £500 of interest received. The allowance will not be available to additional rate (45%) income taxpayers.

Premium Bonds investment limit

This limit is increased from £30,000 to £50,000 on 1 June 2015

The National Minimum Wage rates from 1 October 2015, as recommended by the Low Pay Commission (LPC) will be:

   

• a 20p (3%) increase in the adult rate (from £6.50 to £6.70 per hour)
• a 17p (3%) increase in the rate for 18 to 20 year olds (from £5.13 to £5.30 per hour)
• an 8p (2%) increase in the rate for 16 to 17 year olds (from £3.79 to £3.87 per hour)

The National Minimum Wage rate for apprentices will increase by 57p (20%) from £2.73 to £3.30 per hour. The LPC recommended an increase of 2.6% to £2.80 in the apprentice rate.

The Government is also putting employers in control of the funding for apprenticeships by introducing a new digital apprenticeship voucher. Vouchers can be used to reduce or eliminate training costs with appropriate providers.

Apprenticeship vouchers will further simplify things for employers and give them the purchasing power to fund apprenticeship training.

The employer would register their details on a system being developed by the Skills Funding Agency including their type of business, the details of the apprentice and the apprenticeship standard being signed up to. The discounted rate, which could be up to 100% for 16 to 18 year olds, at which employers can purchase training, would be calculated and the employer would be able to pass on the voucher code to the provider that is delivering the training. The provider would then reclaim the value of the voucher from the Skills Funding Agency.

1 April 2015 – Due date for Corporation Tax due for the year ended 30 June 2014.

19 April 2015 – PAYE and NIC deductions due for month ended 5 April 2015. (If you pay your tax electronically the due date is 22 April 2015.)

19 April 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2015.

19 April 2015 – CIS tax deducted for the month ended 5 April 2015 is payable by today.

1 May 2015 – Due date for Corporation Tax due for the year ended 31 July 2014.

19 May 2015 – PAYE and NIC deductions due for month ended 5 May 2015. (If you pay your tax electronically the due date is 22 May 2015.)

19 May 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2015.

19 May 2015 – CIS tax deducted for the month ended 5 May 2015 is payable by today.

31 May 2015 – Ensure all employees have been given their P60s for the 2014-15 tax year.

In an effort to streamline and simplify the administration of the Self Assessment tax system, HMRC is planning to introduce digital accounts for fifty million taxpayers by 2020. When completed, taxpayers will no longer be required to submit Self Assessment tax returns to HMRC.

Instead, HMRC will gather information from employers, pension providers, banks and building societies, and automatically post data regarding salaries, benefits, pensions and investment income to the digital accounts.

It is still not clear how information regarding property income, capital gains, business profits and other chargeable income or gains will be gathered by HMRC, although it has been mooted that it will be possible to link business accounting software with the digital accounts by 2020.

This is a radical shift from the present “gathering and filing” processes that presently places the responsibility for the make-up and lodgement of Self Assessment data on the taxpayer. In some respects it harks back to the days prior to Self Assessment when HMRC used to issue assessments to taxpayers, who were then obliged to check the numbers.

Information published so far by HMRC indicates that:

• Taxpayers, and their agents, will be able to access their digital accounts to make real time changes to data and pay their tax.
• Fifteen million taxpayers will be set up with digital accounts as early as 2016 with the remainder given access to their digital accounts by 2020.

More details are needed in order to assess the impact of these changes and HMRC have advised they will publish this later this year.

It will be interesting to see how the change will impact associated issues such as late filing penalties. Hopefully, HMRC will abandon these charges for taxpayers where little or no tax is due.

The Government will also need to consider digital exclusion: how are they going to accommodate taxpayers who cannot easily access the internet for various reasons?

 

Did you know that if you take on domestic help you may be considered an employer?

Anyone who works in a private home is treated as an employee if they only work for one family, except for au pairs. This includes nannies, housekeepers, gardeners and anyone else working for one family. You’re their employer if you hire them.

As an employer you would need to ensure that an employee:

• has an employment contract
• is given payslips
• does not work more than the maximum hours allowed per week
• be paid at least the National Minimum Wage

They’re also entitled to employment-related benefits, if they meet the eligibility requirements. These include:

• statutory maternity pay
• statutory sick pay
• paid holiday
• redundancy pay

Additionally, domestic employers must:

• check if the person can work in the UK
• have employer’s liability insurance
• register as an employer and send employer tax returns each year – even if they pay the employee in cash

Running a home with staff is the equivalent of running a business with staff, there are a multitude of legal matters you will need to consider.

Do you have any idea if your estate will have an inheritance bill when you die? How much will it be? Who will have to pay it?

Planning opportunities arise if:

1. If you have assets that you would like to give away.
2. If you have any interests in a business or company, or own agricultural property.
3. If you have assets that you would like to gift, but are concerned that other parties may seek to control those assets against your wishes.

These and many other scenarios, particular to your circumstances, may be available. The key is to explore these planning strategies before the burden of responsibility for settling tax is passed to your executors, and ultimately, your family and beneficiaries.

There are a number of tax planning opportunities that will cease to exist once the clock passes midnight, 5 April 2015. For businesses whose year end is the 31 March 2015 these opportunities include:

• The timing of capital purchases: equipment, vehicles and so on.
• The timing of significant overhead expenditure.
• Dividend and profits extraction planning if your business is a limited company.
• And again, if you have a limited company is your director’s loan account overdrawn?

In fact, all taxpayers, whether in business, employment or receiving a pension, may have opportunities to legitimately reduce their tax liabilities for 2014-15. The point of this article is to remind you that once the tax year end passes these opportunities will be lost, very often permanently.

Readers who are in business, or who have significant or complex sources of income, should have contacted and consulted with their tax advisors by now. If not, there is still just over three weeks to take action. Please call to see if there are any advantages that may be available to you.

You may be kicking yourself later this year if you pass over this planning window without taking action.

None of the comments that follow should stop you considering strategies that minimise your tax position based on current law and best practice. One thing that HMRC has failed to mention in its published comments, highlighted below, is the number of taxpayers in the UK who pay too much tax because they failed to claim allowances and reliefs available. Planning is critical especially if your tax affairs are complex.

Here’s what HMRC have said:

1. HMRC is serious about stopping avoidance: the Government is taking unprecedented steps to clamp down on the small minority who try to avoid paying tax that is legally due.
2. Other people are getting out of avoidance: increasing numbers of people involved in multiple avoidance schemes are approaching HMRC to settle up so that they can put the past behind them and protect their reputation.
3. HMRC wants to help tax avoiders to get out of avoidance: HMRC will work with avoiders who demonstrate a commitment to resolving their avoidance arrangements to finalise their tax liability and will provide certainty over payment terms. HMRC has set up a single point of contact to help establish the possible terms for exit from each scheme a serial avoider uses.
4. HMRC is moving more quickly to tackle serial avoiders: as they close in and increase their focus on this minority, HMRC will look ever more carefully at those who use multiple schemes.
5. The tax avoider is the one who is responsible: even if a promoter or agent has arranged the avoidance scheme for the user, the avoider remains responsible for their own tax affairs and what is put on their tax return. Serial avoiders will personally have to provide HMRC with information and documents regarding their tax affairs.
6. HMRC has a special unit looking at tax avoiders: the Serial Avoiders Unit is identifying users of multiple schemes who choose not to approach HMRC to settle their affairs.
7. Tax avoiders may personally have to attend meetings with HMRC investigators: HMRC will ask questions about their tax affairs and will be checking that they have the full facts about their arrangements.
8. HMRC will look at all the tax avoider’s tax affairs: serial avoiders will be subject to a more co-ordinated approach to challenge and resolve their tax affairs. HMRC will look at their current activity, not just enquiries that are already open. And they will look at all the entities and structures the tax avoiders are connected with, to challenge any avoidance and evasion in all areas of their affairs.
9. Tax avoiders may have to pay up front: HMRC will fundamentally reduce the incentive to engage in serial tax avoidance and recover all duties legally due at the earliest opportunity. Multiple users of schemes may receive Accelerated Payment Notices before other users of a scheme.
10. There are heavy sanctions: HMRC will evaluate the behaviour of each serial avoider and this could result in penalties for careless or deliberate behaviour or for any failure to disclose avoidance. Deliberately misleading or concealing information from HMRC could lead to prosecution and criminal conviction.

These comments are a reminder, as we approach the end of another tax year, that overstepping the mark can have serious consequences.